In addition to trending and benchmarking, balanced scorecards are another way to evaluate an organization’s performance. With balanced scorecards, a board is given a better understanding of the organization’s operations as a whole. They are effective for gaining a complete picture of an organization.
Balanced scorecards integrate financial elements along with other key elements to compare an organization’s outcomes versus its goals. The Harvard Business School Press describes balanced scorecards as “provid(ing) executives with a comprehensive framework that translates a company’s vision and strategy into a coherent set of performance measures.”
Four Quadrants of Balanced Scorecards
These four quadrants are performance measures that can be used to monitor and improve an organization’s effectiveness. Within these quadrants are additional measurement suggestions. A particular organization may prefer certain assessments over others depending on its own unique success combinations.
Financial Perspective Quadrant
- Return on Capital
- Competitive Position
- Volume Growth
- Reduced Cash Outlays
- Improved Cash Receipts
Customer Perspective Quadrant
- Customer Satisfaction
- Employee Satisfaction
- Funder Satisfaction
Internal Perspective Quadrant
- Product Innovation
- Perfect Orders (error reduction)
Learning and Growth Quadrant
- Strategic Awareness
- Mandated Hours of Education per Employee
Developing a Scorecard
Start developing a scorecard using the following steps:
- Establish an organizational business strategy through the outlining of the key elements that make the nonprofit a success.
- Adequately describe the strategy in detail to key players such as users and employees to gain their confidence and teamwork.
- Develop the scorecard framework with objectives and performance measurements that closely embody the strategic objectives outlined by the organization.
Remember, the purpose of a scorecard is to give a full picture of the financial and non-financial goals and to establish a method for monitoring their effectiveness.